Durham Stabilization Inc. v. SBBI Inc.

Pending
before the Court are Plaintiff United States of America, for
the use and benefit of Durham Stabilization, Inc.'s
Motion for Partial Summary Judgment on the First and Second
Claims for Relief, (“Plaintiff's Motion, ”
Doc. 23), and Defendants SBBI, Inc. and Hartford Fire
Insurance Company's Motion for Summary Judgment,
(“Defendants' Motion, ” Doc. 25). The Court
now rules on both Motions.

This
case arises out of the Three Forks Road Project (the
“Project”) for the United States government
located in Apache County, Arizona. Defendant SBBI was the
prime contractor on the Project. SBBI subcontracted with
Plaintiff Durham Stabilization.

In May
2014, SBBI entered into a construction contract with the
Federal Highway Administration (“FHA”) involving
the Project. (Separate Statement of Facts in Support of
Plaintiff['s] Motion for Partial Summary Judgment, Doc.
24 (“PSOF”) at ¶¶ 1, 2;
Defendants['] Statement of Facts, Doc. 26
(“DSOF”) at ¶ 1). SBBI obtained a Miller Act
payment bond from Defendant Hartford Fire Insurance Company
in relation to the Project. (PSOF at ¶ 3;
Defendants['] Controverting Statement of Facts, Doc. 29
at 3-17 (“DCSOF”) at ¶ 3).

SBBI
subcontracted with Plaintiff to provide materials in the
estimated quantities as follows:

Item Description

Est. Quantity (tons)

Unit Price

Total Amount

Emulsified Asphalt Grade CSS-1

1, 310.00

$700.00

$917, 000.00

Emulsified Asphalt Treated Aggregate Base

66, 800.00

$10.54

$704, 072.00

Total

$1, 621, 072.00

(Doc.
1-1 at 11). Plaintiff also agreed to provide two types of
bond allocation.[2] (Id.). The subcontract was a unit
price contract, which obligated SBBI to pay Plaintiff for all
items actually supplied by Plaintiff, even if those amounts
were above the estimates provided in the subcontract. (DSOF
at ¶ 4; Plaintiff[‘s] Objection to
Defendant[']s Separate Statement of Facts, Doc. 28
(“PODSOF”) at ¶ 4; Doc. 1-1 at 3).

SBBI
grew concerned over “potential negative effects of rain
on paving conditions” and wanted to change the
materials it had contracted with FHA to provide. (Doc. 37 at
2; see also Doc. 24-2 at 18). As a result, after
SBBI and Plaintiff entered into the subcontract but before
Plaintiff commenced work, SBBI and Plaintiff agreed to a
“no- cost change order” but failed to define this
term during their negotiations.[3] (Docs. 24-1 at 17; 24-2 at 14; 23 at 3; 29
at 6). SBBI and Plaintiff agreed to replace the emulsified
asphalt grade CSS-1 with two separate items: foamed asphalt
grade oil (“FAGO”) and cement type II/V. The two
parties agreed to price the cement at $400 per ton, but it is
unclear whether the parties agreed to a specific unit price
for the FAGO. (PSOF at ¶ 7; DCSOF at ¶ 7).
Maintaining a price of $10.54 per ton, SBBI and Plaintiff
also agreed to replace the emulsified asphalt treated
aggregate base with foamed asphalt and cement treated
aggregate base. (PSOF at ¶ 7; DCSOF at ¶ 7). While
the subcontract included a procedure for the parties to
follow in implementing a written change order, (Doc. 1-1 at
4), the parties ignored this provision and agreed to the
change order orally, (Docs. 24-1 at 17; 24-2 at 14; DSOF at
¶ 18; PODSOF at ¶ 18).

In June
2014, SBBI submitted to FHA an informal, written proposal to
change the contract specifications, reflecting the change of
materials described above. (DSOF at ¶ 9; PODSOF at
¶ 9; Doc. 24-2 at 98-99). In the proposal, SBBI stated
that the change “would not affect the cost to [FHA],
” and “SBBI will absorb the additional cost for
this method of installation since the current specification
will be very difficult to meet this time of year owing to
anticipated monsoonal activity for the area.” (Doc.
24-2 at 98). FHA did not return the “final Amendment of
Solicitation/Modification of Contract, ” reflecting the
aforementioned changes, to SBBI until December 2014. (DSOF at
¶ 31; PODSOF at ¶ 31).

In
August 2014, FHA acknowledged that it would approve the
changes pending receipt of “certified cost and pricing
data” and notified SBBI that it could proceed with the
proposed contract change. (Doc. 24-2 at 56-57, 167-68; PSOF
at ¶ 13; DCSOF at ¶ 13). Shortly thereafter, SBBI
communicated this approval to commence work to Plaintiff.
(PSOF at ¶ 13; DCSOF at ¶ 13; Doc. 24-2 at 59).
Plaintiff then completed the work pursuant to the changed
specifications in a “timely and workmanlike
manner.” (PSOF at ¶ 15; DCSOF at ¶ 15; Doc.
24-3 at 3).

Plaintiff
submitted two invoices to SBBI for the project: one based on
estimated quantities and the second based on actual
quantities delivered for the Project. (PSOF at ¶ 16;
DCSOF at ¶ 16). Plaintiff's second invoice-based on
actual quantities delivered-included the following quantities
and unit prices:

Item Description

Quantity (tons)

Unit Price

Total Amount

Foamed Asphalt Grade Oil

1, 014.44

$700.00

$710, 108.00

Cement Type II/V

605.35

$400.00

$242, 140.00

Foamed Asphalt and Cement Treated Aggregate Base

61, 428.36

$10.54

$647, 454.91

Total

$1, 599, 702.91

(Doc.
24-2 at 184). Following receipt of the two invoices, SBBI
paid Plaintiff a total of $1, 357, 562.92, (Doc. 34 at 2),
which represented payment for both the FAGO and foamed
asphalt and cement treated aggregate base.[4] (DCSOF at ¶¶
17-19; PSOF at ¶¶ 17-19). SBBI rejected “any
charges for cement at $400 per ton” because FHA
“had not yet approved the change order[, ] and it was
therefore impossible to invoice the cement component.”
(DSOF at ¶ 17; Doc. 24-2 at 183). SBBI finally received
FHA's approval of the change order in December 2014.
(DSOF at ¶ 31; PODSOF at ¶ 31).

In
January 2015, SBBI reconciled Plaintiff's two invoices
and FHA's Amendment of Solicitation/Modification of
Contract. (DSOF at ¶ 32; PODSOF at ¶ 32).
Specifically:

1) SBBI replaced FHA's estimates under the contract with
FHA's “new specifications, ” or
esti5mates, for material quantities under the
change order.[5]
(DSOF at ¶ 33). Specifically, FHA estimated the Project
would require:

2) SBBI then used unit prices of $10.54 for the foamed
asphalt and cement treated aggregate base and $400 for the
cement type II/V to calculate a $473.98 FAGO unit price. In
other words, setting the FAGO unit price at $473.98 ensured
that the total contract price using the FHA estimates for the
change order materials would be nearly identical to the
original subcontract's total price ($1, 621, 067.40 for
the changed specifications and $1, 621, 072.00 for the
original specifications-a $4.60 difference). (DSOF at
¶¶ 33-36). These calculations are depicted below:

SBBI
believes that the term “no-cost change order”
implied the performance of these reconciliation calculations.
(DSOF at ¶ 19). Thus, after completing the
reconciliation, SBBI determined that it had paid Plaintiff in
full. (Id. at ¶ 38).

On the
other hand, Plaintiff believes that the term “no-cost
change order” meant that the total price of the
original contract ($1, 621, 072.00) would be greater than or
equal to the total price of the subcontract reflecting the
changed specifications and actual quantities ($1, 599,
702.91). (Doc. 23 at 3). Plaintiff states this is a
“no-cost change order” because “the changed
product would require [Plaintiff] to use less oil so the
tonnage quantity was going to be reduced and the difference
was going to pay for the cement component.”
(Id.).

Plaintiff
filed this suit against SBBI and SBBI's surety, Hartford
Fire Insurance Company, under the Miller Act, which requires
contractors doing construction contract work for the United
States government to obtain performance and payment bonds to
ensure the work is completed and that all persons supplying
labor and material for the project are paid. See 40
U.S.C. §§ 3131-34 (2012). Plaintiff also sued
Defendants under breach of contract and promissory estoppel
theories. (See Doc. 1).

II.
LEGAL STANDARD

Summary
judgment is appropriate when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a). A
party asserting that a fact cannot be or is genuinely
disputed must support that assertion by “citing to
particular parts of materials in the record, ”
including depositions, affidavits, interrogatory answers or
other materials, or by “showing that materials cited do
not establish the absence or presence of a genuine dispute,
or that an adverse party cannot produce admissible evidence
to support the fact.” Id. 56(c)(1). Thus,
summary judgment is mandated “against a party who fails
to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that
party will bear the burden of proof at trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Initially,
the movant bears the burden of pointing out to the Court the
basis for the motion and the elements of the causes of action
upon which the non-movant will be unable to establish a
genuine issue of material fact. Id. at 323. The
burden then shifts to the non-movant to establish the
existence of material fact. Id. A material fact is
any factual issue that might affect the outcome of the case
under the governing substantive law. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). The non-movant
&ldquo;must do more than simply show that there is some
metaphysical doubt as to the material facts&rdquo; by
&ldquo;com[ing] forward with &lsquo;specific facts showing
that there is a genuine issue for trial.&#39;&rdquo;
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586-87 (1986) (quoting Fed.R.Civ.P. 56(e)). A
dispute about a fact is &ldquo;genuine&rdquo; if the evidence
is such that a reasonable jury could return a verdict for the
non-moving party. Liberty Lobby, Inc., 477 U.S. at
248. The non-movant's bare assertions, standing alone,
are insufficient ...

Our website includes the first part of the main text of the court's opinion.
To read the entire case, you must purchase the decision for download. With purchase,
you also receive any available docket numbers, case citations or footnotes, dissents
and concurrences that accompany the decision.
Docket numbers and/or citations allow you to research a case further or to use a case in a
legal proceeding. Footnotes (if any) include details of the court's decision. If the document contains a simple affirmation or denial without discussion,
there may not be additional text.

Buy This Entire Record For
$7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.